Companies will be able to take the corresponding income tax deduction for any payments made to employees upon actual payment, and subject to the company complying with the applicable withholding and reporting obligations. Particular consideration on the specific deductibility limitations for certain types of employees or benefits is advisable (e.g. high ranking officers, profit based incentives, etc.).
Companies shall issue electronic tax invoices for any employee compensation paid, including information on the concepts and amounts comprising such compensation. These invoices must be delivered to the employees (while they are also automatically remitted to tax authorities).
Withholding and reporting on stock options plans will depend on the specifics of the plan. As an overall rule, companies will have to report on a yearly basis the information on employees who exercised the option for purchasing stock.
Any benefits that are deemed exempt income for employees will be partially deductible for the company, at a 47% or 53% rate, in this latter case subject to the company not having reduced its exempt compensation from the previous year.
As for local (state) payroll tax, incentives will regularly be deemed part of the taxable base depending on the state where tax is due and will trigger a 2-4% tax due on the company upon actual payment. Stock option plans may eventually fall outside the scope of local payroll taxes, subject to analysing the corresponding plan and the state in which it would be taxed.
An eventual sale of shares acquired as part of a compensation plan will trigger a taxable gain to the employee. However, withholding on such sale will be due on the buyer and not on the company.
With regards to loans offered to employees, there are no specific rules or regulations stating whether these would constitute taxable income or any specifics thereon. Loans, however, may fall under the broad conception of “benefits” referred to in the MITL, for which a case-by-case analysis would be recommendable.
For social security purposes, certain awards can be considered as part of the base salary of contribution before the Social Security Institute, hence each award or incentive plan must be reviewed for purposes thereof.